Company should have called in HR: pay cut refusal leads to unfair dismissal

A competent retail store manager sacked after refusing a substantial pay cut after a role change has won her unfair dismissal case – and this could have been avoided if in-house HR expertise had been utilised, according to the Fair Work Commission.

The FWC found that the retail chain unfairly dismissed the manager of its suburban Sydney store after she refused to accept it changing her remuneration package from $80,000 base salary and a car to $54,000 base and no car.

The manager had agreed to move from a head office managerial role to the then poorly-performing store on the same remuneration package. However, after 11 months — during which time the store’s turnover increased by about 19% and it became one of the company’s top six outlets — the company’s director told her that her salary was to be brought into line with other store managers. The director informed the manager that if she did not accept the new pay structure, she would have to resign.

A month later, after the manager had repeatedly told the company director in writing that she would not accept the change or resign, the director informed her that she had resigned.
The judge indicated that while it was open to the company to seek changes to the employee’s salary package given that her remuneration no longer matched her position, it was both harsh and unreasonable for the director to force her to resign if she did not agree.

“A more appropriate way of dealing with the issues relating to the [employee’s] remuneration package and for any necessary or proposed adjustments to be negotiated might have been found if different procedures involving human resource expertise had been followed,” he said. The judge said that the company was a “sizeable employer” that employed dedicated HR professionals and would have procedures for dealing with employment contracts and termination. He said, however, HR staff “were not involved in the discussions, negotiation or decision”.

The company’s treatment of the manager was particularly harsh given that she had worked for the company for more than 12 years, with no complaints about her performance, conduct or commitment to the company. The only complaint, he said, was that the company considered that the remuneration was too high given the different role she had been asked to undertake on its behalf. The judge ordered the company to pay the manager 14 weeks’ salary as compensation. The case can be viewed here.

There are a number of ways to avoid costly and time consuming court actions when redeploying employees. iHR’s employment contracts services include reviewing contracts already in place or drawing up new terms of employment and position descriptions with reference to relevant awards and legislation.

Another option that guarantees you a clear and independent perspective is HR outsourcing. For organisations seeking a complete HR solution or where outsourcing of a particular service or project is required, iHR offers a range of flexible outsourced HR services suitable for industries and organisations of varying sizes and maturity.